U.S. Seen Joining Biggest Oil Exporters If Ban Is Lifted

(Bloomberg) — The U.S. will become one of the world’s largest oil exporters if domestic production continues to surge and policy makers lift a four-decade ban that keeps most crude from leaving the country, a government-sponsored study shows.

America would be capable of sending as much as 2.4 million barrels a day overseas in 2025 if federal policy makers were to eliminate restrictions on most crude exports, an analysis by Turner, Mason & Co. for the Energy Information Administration shows. That would make the U.S. the fourth-largest oil exporter, behind Saudi Arabia, Russia and the United Arab Emirates, based on 2013 EIA data. The report assumes domestic output rises by 7.2 million barrels a day from 2013.

The analysis is part of a series of studies the U.S. government is performing following a 71 percent surge in domestic oil production over the last four years. Drillers including Harold Hamm of Continental Resources Inc. and John Hess of Hess Corp. have been calling on the government to lift the ban on crude exports as they pump more light oil out of shale formations from North Dakota to Texas.

“We are already the world’s leading exporter of refined products,” John Auers, executive vice president at Dallas-based energy consultant Turner Mason, said by phone Tuesday. “Based on developments in the last few years in tight oil formations and deepwater, the U.S. has the resource base to be a big crude exporter as well.”

The report doesn’t account for potential changes in domestic crude output and prices because of the lifting of the U.S. export ban, nor does it consider competition abroad. U.S. benchmark West Texas Intermediate crude gained 2.5 percent to $61.95 a barrel on the New York Mercantile Exchange at 11:30 a.m. London time.

Extreme Scenario

Turner Mason’s study was designed to show the upper and lower bounds of the future for U.S. energy, Auers said. Exports of “2.4 million is probably not a likely scenario, but it shows what might be possible,” he said.

The consultant’s forecast for exports in 2025 is almost double what EIA administrator Adam Sieminski said the U.S. could export right away if restrictions were limited. During a Dec. 11 congressional subcommittee hearing, Sieminski said there was space in today’s global market for 1 million to 1.5 million barrels a day of U.S. crude.

Alaska Senator Lisa Murkowski, the Republican chair of the Senate Energy and Natural Resources committee, has said she’ll bring a bill forward this year to overturn the export ban. Several reports including one issued last year by IHS Inc. found that ending the ban would lower U.S. pump prices by putting pressure on international crude oil markets.

Refiners such as PBF Energy Inc. have argued against lifting restrictions, saying it would reduce investment in new equipment in the U.S. and possibly hurt East Coast plants that now depend on rail shipments of domestic crude for more than half of their supplies.

Refinery Expansions

The country’s capacity to refine light shale oil would still expand should legislators vote to lift the ban, just not as much as it would if the restrictions remain in place, Turner Mason’s report shows. Domestic capacity increases by 2.4 million barrels a day, assuming the ban is unchanged and by 800,000 if it’s lifted.

“More costly hydroskimming refineries are not built,” the report shows, “because the ability to export crude oil prevents the price of WTI from declining to a level that would support such investment.”

–With assistance from Kelly Gilblom in New York and Bill Lehane in London.